DIAMOND’S AMNESIA at the Select Committee: a reality injection

How the man in love with a bank launched a fund that screwed the customers

Blind man’s bluff fails dismally

There are times when the Right leaves me just as frustrated as the Left in its willingness to excuse anything – rather than give way and accept that the other side has a point. After three hours of sleep-inducing, wriggling, jargobollocks from Diamond Bob – a man so obviously covered in self-exculpating slime, he made Nixon look like Snow White – Dan Hannan offers this smart-arsed, half-arsed tweet:

‘So, chaps: still think that what the financial sector needs is more regulators?’

His smug, Tory point is that the regulators didn’t stop Barclays from behaving like hobgoblins who were rejected by the other goblins for being too heavy on the hobbing and goblinning…so why have regulators? Hurrah! And like most Conservative observations, it plays the human nature card in a sort of anti-Hobbesian context: ‘we’re all nasty and brutish, so go for it: bring on the Christians – and let’s make sure the lions have nothing to eat beforehand’.

But to the closed Tory mind, the reality that every deregulation from drink to employment has been laid onto a suppuratingly awful soci0-economic culture (and thus failed miserably) has yet to dawn. Poor Dan is still locked in the dark night of Baroness Thatcher’s soulless philosophy.

What Bob Diamond did today was start on Lieborgate where James Murdoch left off on Hackgate: excuse me sir I didn’t quite catch the question, I love my company, no I was not told that sir, if I can just refer you to this paragraph here, what these people did was totally reprehensible….on and on it went, although this time the TSC’s response was considerably less indulgent. His thinly disguised display of arrogant subservience went down like a cip of cold sick, and left nobody – but nobody – in the room in any doubt about the nature of this shady man’s character.

So perhaps this is the right time to remind people of that of which the Diamond Geezer is capable.

Diamond Bob was a little light on character judgement himself when it came to forming a partnership between Barcap and Geneva-based investment outfit Avendis a few years back.

Avendis Capital was founded  in February 2001 by four partners – Eric de Sangues, Yannis Bilquez, David Benichou and Marco Rigo. In 2002 the company diversified into investment management and launched Avendis Enhanced Fixed Income, described by de Sangues at the time as one of the world’s first ‘correlation hedge funds’. The use of a meaningless four-syllable jargon word there is par for the course with Eric: in 2005 he gave out with this complete wobbly-bollocks to Hedge Weekly:

“The fund develops relative value strategies in the capital structure of synthetic static CDOs through 2 different approaches both quantitatively driven. Bespoke static Synthetic CDO Tranches are used to build exposure to investment grade credit idiosyncratic risk [and we] trade Standard index tranches of iTraxxIG and DJ CDX IG. The strategy takes advantage of structural dislocations in the correlation market, and increased liquidity of the Index Tranche market, to generate alpha through momentum and mean reverting relative value trades in the capital structure.”

There are a great many former Barcap/Avendis investors who would give a lot for just one chance to exert some structural dislocations closely correlated with Eric’s neck, but anyway Barcap’s Diamond Geezer liked the cut of his jib, and in 2006 together they launched a fund called Golden Key.

Golden Key was a type of structured investment vehicle (SIV-lite) pioneered by Barclays Capital. So Diamond can’t wriggle put of this by citing ‘bad advice’: Avendis was merely the vehicle for something Barcap had already invented. It was based on toxic mortgage crap: and as this was already a known risk, one could debate for hours as to Barclays’ motives for wanting a vehicle not called Barclays to market it. Certainly, shifting several billion in radioactive isotopes off the books is never a bad idea.

The whole thing turned to poo-poo quite quickly.

On 30th November 2007, Yannis Biquez was arrested by the Geneva police and charged with offences involving ‘betraying the confidence and embezzling the money of investors’. He was eventually found guilty of embezzzling $20m in 2008, but just three weeks after his arrest, Barclays Capital lent Avendis $1.5 billion. The reason given to the shareholders was ‘severe liquidity troubles in the financial markets’, something of an understatement as the loan was equal to the value of the entire assets under management by Avendis.

Barclays shareholders may well ask themselves whether this was an entirely wise move in the circumstances. While regulators might wonder if other agendas were in play.

On November 2008, there was more bad news: the authorities issued fines totalling €100,000 against Avendis Capital SA, for ignoring short-selling rules  issued by the EU. This was also the year that the company’s investors got together to sue Avendis…. because they believed BarCap had used the SIV-lites, via borrowings, to take the toxic securities off Barclays’ accounts. The case alleged that Avendis directors and senior Barcap investors all conspired to carry out this dumping of cancerous junk, but I’ve no idea what gave them that idea. Heard in New York, Barclays hired a smart lawyer to find a hole in it the case was thrown out on a technicality.

After reading yesterday’s news about the outbreak of speech impediments among the accused, Terence Corcoran at the Financial Post described Barclays and Diamond as ‘the victims’ in all this chicanery. While I posted something similar myself last week, I didn’t run to calling them victims: they are victims in roughly the same way that Hamas are victims: they had some pretty outrageously anti-social ideas long before Paul Tucker & Co gave them any more.

But there we have it again with the Left-Right-Left-Right robotics. Tom Watson’s commendable attack on Newscorp has not extended to Trinity Mirror. For the Left, every attempt by Israel to defend itself against anti-democratic illiberal Islamism is suffused with evil. For the American elite, every shit on the planet is fair game as an ally potential so long as they’re willing to defend US interests. Boris Johnson defended Newscorp’s indefensible behaviour on te grounds of the accusations being ‘left wing poppycock’.

What enables the bad guys to win more often than not is that the good guys tend to be (a) more interested in their families (b) busy doing socially good stuff elsewhere (c) modest (d) endlessly tolerant and, above all, (e) hopelessly divided by loyalty. I wish more of them would wake up to how they are being played like a dopey salmon on a strong line.

59 thoughts on “DIAMOND’S AMNESIA at the Select Committee: a reality injection

  1. They are waking up, more & more ask what they should do,they do not know what to do & feel even more angry for it,What will spark it off,
    something very trivial i guess

  2. The timing of the LIBOR scandal really is very irritating.
    I bought ten debenture Wimbledon tickets for this week, at a cost of over £38,000 and invited my banker pals over for some strawberries, champagne, and an eyeful of bronzed and freckled cleavage. All I get is rain and eight empty seats as most of my guests are helping police with their enquiries.

    I

  3. @John: You don’t understand Dan Hannan.
    He is NOT against sound, necessary and effective regulation of the financial services industry (like most of us, he accepts that capitalism needs some regulation to prevent abuse/greed), nor is he against hitting violators hard when they break the rules.
    He IS against the mindless and socially pointless big govt regulation that your dear socialist Labour Party always introduce for no other reason than to exercise power & control. That is, except when it’s the financial services industry who Blair/Brown developed a corporatist/fascist relationship with for their own benefit and wiped away virtually all regulation and stuffed the FSA with Brown’s cronies and other assorted misfits.
    And unlike Brown, Hannan would strongly lean towards allowing proper capitalism to take its course when errant banks got themselves into deep doo-doo due to Brown having wiped away regulation.
    There’s a world of difference. Too bad you have difficulty seeing that.

    • Exactly so. But watching these MPs ‘interrogate’ today was like watching Inspector Clouseau on the trail of Carlos the Jackal. It seems clear to me that the Tartan Caliban and his henchmen did indeed ask banks via a nod and a wink to manipulate LIBOR down. Obviously it suits everyone to deny it; I find it hard to get excessively worked up about it. Since banks weren’t lending to each other at all in 2008, all manipulating LIBOR downwards did was stop my mortgage interest rate going exponential. I like living in my house; making my monthly mortgage payment is quite important in that regard. If they had been manipulating it the other way, I’d be lining up with my pitchfork just like everyone else.

      But either way this pursuit of Barclays to the exclusion of all the other banks involved strikes me as fundamentally wrongheaded. The powers that be, in their anxiety to escape any examination of their own role (FSA for supine non-regulation, BoE for f***ing up both interest rates and the money supply, keeping it loose when it should have been tight & then tightening as we swept into a depression, MPs for their own fiddling) are sending a message to all the banks: ‘if you co-operate with us we will defenestrate your management and tip a bucket of ordure all over you to ensure we don’t get any of the blame’. Brilliant. Now no bankster with half a brain is ever going to come to a plea bargain ever again. Given the glorious record of the SFO et al, I wouldn’t expect any successful pursuit of wrongdoing in future.

      • SW, fairpoint about bankers plea bargains and you have to wonder why Barclays wanted to get in first. One assumes they were smart enough/ well advised enough to anticipate the fallout the FSA publication would cause. So what happened? Either they expected this or someone cocked up the strategy spectacularly. Perhaps they used American lawyers who didn’t understand how the BoE operates, or didn’t care as they’d already screwed their £100m in fees. Or Diamond was so arrogant he thought he could ride it out. Diamond claims he only found out about the fraudulent manipulations this month. Does he actually know what month it is? He either has no idea what goes on at Barclays or he is a lying t***. I incline to the latter.

        I get the impression politicians would like us to believe that SFO cannot afford to prosecute cases like this as they are too big and expensive and juries can’t understand them. So Barclays are now Too Big To Prosecute aswell as TBTF. I’d much rather see my taxes spent on trying these greedy b******* than bailing them out. Then confiscate all their bonuses and share options as proceeds of crime. Or expose our legal system as weak and corrupted as our politicians and banks. I’m afraid I incline to the latter on this one aswell.

    • Quite right. It is a pity this hate of the Conservative Party and the desire to make it to blame because its raining this morning makes people blind to the true authors of this, and that is the chronic incompetance and damn stupidity of the Labour Party. Everything Brown touched he has messed up and regulation of the Financial system is probably his biggest mess after the States finances. And who was there all along ? Ed Balls and little wee Ed Miliband as bag carrier.

    • BT,
      You say the Tories would like strong effective regulators (as though they are the only folk that want that outcome) but they also want them not to cost anything.
      They are either lying to themselves or us.

      • @Altergoman: I was commenting specifically on Dan Hannan, not the Tory Party in general. As a believer in Austrian School economics, Hannan believes in allowing proper market capitalism to operate, and winners & losers are a by-product of that. Effective regulation is a necessary part of that. That is quite different to what we saw under 13 years of Labour’s progressive crony capitalism.
        Regarding Labour…it’s not clear to me whether they even understand what the correct purpose of proper regulation is, let alone have the competence or honest motivation to manage it because they get sidetracked by their own corrupt agendas (the Libor scandal is only one example of Labour’s corruption). To them, the purpose of regulation is so often to provide the State (themselves) with more power and control of the economy and society in their drive for total government, not to ensure its smooth functioning. An example: is it not amazing that in May/1997 the cost of ‘regulatory compliance’ on the wealth producing sector of Britain’s economy was £11 billion pa. When they left office May/2010 it was £84 billion pa.

    • Sorry BT but Dan is a party before country lad.

      Vis the vid link of his speech on ACTA to which he links declaring his intent to vote against it ‘in its current form’. However – checking the actual voting record – he actually abstained ! Dan Han – bright and interesting as he can be – is still just one of the same band of pilgrims heading off on their own path to righteousness. Without taking us down that same path…which we have to lay and smooth before them to ensure the way is clear. Dan has been trying to pesuade people that a cast iron guarantee from cameron is an acceptable proposition………….party before people !

  4. We need unfettered capitalism.Banks going bust,interest rates unaffected by ‘senior sources’from Whitehall(a token woman banker from a failed Swiss bank),and an open society where token woman’s paper to the PM ,on rigging LIBOR,is published immediately, not 4 years later.And we can do without another British Leyland(aka ROYAL BANK OF SCOTLAND),and an unreformed Rolls Royce(aka Lloyds HBOS).In the meantime,keep writing puts in Barclays,it is not going bust, to preserve your savings.

    • William,

      I would have thought your granting of Puts at 180p for 31 p would/should have been taken out at around the time when Barclays were trading in the 130′s for a net loss to you on the trade so are you being neologistic with the word ‘profitable’?

  5. The law is a funny ole thing. Many of us know right from wrong and some of us make choices which we know may have consequesnses. Now I learned that at a young age, the law has nothing-absolutely- nothing to do with Justice. It is nice to hear those words. Freedom. Justice, Equality, Democracy. But they never jump out of the page in the dictionary because…WELL, THEY ARE ONLY WORDS. They are used to baffle and blind side us lesser mortals into believeing we are getting something for -something, where as in fact those of us, who wear our specsavers magifying glasses can see, we are getting nothing at a hugh price. John, I love your work and effort you put into this slogg, but you can’t take credit for ‘predicting’ the out come of any enquiry, or MP’s select commitee!! no no lol. We all know the out comes before the postage is paid on the envelope to request attendance!..But BY GOD you are well on the ball with the investigations. and decluttering the jargon, unpiffling the piffle and so on! I could weep for those who buy newspapers for journalistic content or watch the BBC believing it is in their corner to fight the good fight with serious journalism (pah). It really can almost bring a tear to my eye. I once over heard a Judge saying in private, what he needs by his side is a good liar… he was contradicted by the other person by saying ‘don’t you mean Good lawyer?, the Judge replied Yes ! that’s what I said good liar. the other person said “Oh! should he not have a lawyer as well then”, the Judge laughed and said “Have you not been listening to me”…

    • Quite-the law and justice are frequently total strangers. The only thing which might deliver justice in a trial is the common sense of a jury, who if they have such common sense will disregard their oath to deliver a verdict according to the law. They should deliver one according to the justice of the case.

      • @MickC: Absolutely spot on. This probably goes some way to explaining why Blair and others have sought to dispense with juries and why the corrupt CPS prevent prosecution of so many cases involving members of the Greater Establishment…justice being served by juries simply cannot be allowed.

      • They jury will be undermined by the judge, who will decide that whilst the jury have found the defendent guilty, every excuse he has given for his guilt should be taken into account, and therefore he should be treated leniently.

        It is the proferring of excuses, often carefully laid out whilst totally denying culpability at the same time, that has totally undermined the credibility of British justice. The fact that an individual has given a “reason” for having commited a crime should not be considered a reason for not locking that person up for a very long time.

  6. “I wish more of them would wake up to how they are being played like a dopey salmon on a strong line.”
    Sadly, this goes for the general public too. For most people LIBOR is as esoteric as the Higgs Boson particle. They don’t know, or care what it is. Why should they? As long as they can afford to fill their cars with petrol, and get down to Asda for Doritos’s and beer, and get back to their flat screen TV’s with surround sound.
    Who cares ?… What’s the problem?… Chillax…!
    A major shock is coming. I don’t know when, but we won’t have to wait too long.

  7. Libor scandal is in the public doman for some reason that i suspect is not yet obvious. Diversion? Setting the scene for something that would otherwise not be accepted by the public? It seems all a bit convenient. I do not believe for one minute that really guilty people wil be bought to justice. this is all a front for something bigger. Look at the Jeremy *unt saga, more than enough evidence to at least get him sacked.

    • Again I agree. Obviously the Syrian civil war has stopped while we are all diverted by LIBOR. Iran to get whacked while we are distracted?

      • I can’t see Iran getting whacked quite yet…….. they haven’t got any WMDs yet…….Oh wait a minute…..

  8. I can’t help thinking in all this ‘what is their hidden agenda’? (in respect to who ‘leaked/blew the whole Libor fixing scam out into the open & why? What are their (TPTB) motives, who is to gain?

    Newbie here btw, fantastic blog John.

    • Ummmm, Barclays did! Because they were being investigated in the US and decided to come clean to cut a deal with US authorities to ensure they weren’t prosecuted for it. US authorities have since expressed their gratitude to Barclays for so doing. Unfortunately for Barclays, the FSA decided to do their own investigation and have since screwed Barclays based on Barclays OWN submissions. That’s nice of them., Meanwhile other banks that may have been involved have decided not to co-operate with authorities – I wonder if that has anything to do with that fact that Barclays got screwed????

      • JS
        Too many question marks, terrible punctuation, and other misspellings in every comment.
        Are you ignorant or just a normal Troll?
        Just askin’…

  9. False flags come in many colours.
    Today is always a good day to bury bad news.
    Look at me not at him.

    Either of the above or all of them apply to these Libor shenanigans.

  10. I was in London on this 4th of July and watching Diamond Bob on Sky was hilarious. Once more, John you have nailed this scammer.

    I can’t stop laughing from the line “There are a great many former Barcap/Avendis investors who would give a lot for just one chance to exert some structural dislocations closely correlated with Eric’s neck”.

    On a serious note until the day when regulators can earn close to banking compensation you will never have effective regulation. I for one would love to be a regulator – it would be fun policing/nailing these guys before they cause damage. It is economically unfeasible given that i am not purely altruistic.

  11. Actually the only conclusion for inquiring minds is and has always been:

    GB with its city of london (Intentionally no caps!) is the CANCER of the World!
    Together with the USSA and communist China they are the roots of the evil.
    Whenever disaster, crimes, thieves come out look for the usual culprits.
    The oligarchic ROW is just walking along with them brainwashing their own populace.

  12. Re Diamondback Bob’s claim to have only ‘discovered’ the ‘full depth’ of the ‘manipulation’ within the last month: How long did the FSA’s investigation take FFS? And he was unaware/unable to make his own enquiries during the course of it? Or maybe the FSA carried it out entirely without the bank’s knowledge (perhaps that was it..). The only sort of person who would even think of making such a thoroughly ridiculous claim with any expectation of being believed is someone who doesn’t give a shit either way. That, apparently, also goes for the TSC in large part. If you tried to play cricket with any of them you’d probably get bowled from behind.. They, together with their mean reverting relatives, are quite without shame or judgement.

      • BC & Jon
        Actually it doesn’t apply to me at all, as I’ve owned the house for so long, the cgt statute has run out. But it was a predictable card for FH to play….and predicted by me.

  13. If truth is the first casualty in war, these people – if nothing else – are allowing the public perception to grow that they are, in fact, at war with the rest of us by other means. Very unhealthy for all concerned.

  14. Those awfully nice lawyers fron America seem quite determined to bring quite a number of British bankers to trial in the USA,where they will be held until the trial date.This should bleed the British bankers of their bonuses,however let us be clear,the Brits are mere patsies for what Nerw York wanted done.New York sought and obtained regulation light jurisdiction and proceeded to hypothecate and re-hypothecate as much dross as was printed on a computer program-all the time slicing their cut back to the Hamptons.
    A show trial is coming with people with the wrong accents in the wrong place to take the fall for American bankers and policy.

    • Well they have to find a way to stitch London up, because there are even more outright crooks in the US merchant banks we have discovered and that has left London to be the best place to do business. I don’t think it will work though – Barclays in the end protected its customers business whereas Goldman Sachs, JP Morgan et al have actually been stealing large amounts from their customers.

  15. I suppose one curious thought about the Left / Right issue is how they, politicians, probably now have to compete to cosy up to the money, bankers and elite, whereas prior to Blair they didn’t. The Left was once happy only when it was making the City boys nervous and the Right always behaved as though they were all one big familly.

    If that is a fair assessment, I suspect that one effect of the shift during the Blair / Brown years is to make the money boys even more powerful and possibly, almost invincible.

    Arrogance and abuse of power is an inevitable result. But how to undo that is the issue. I can’t see both Left and Right turning the new status quo on it’s head anytime soon.

  16. Totally agree with your thoughts on regulation…..heavy regulation doesn’t work ,is expensive and innefficient…..but it seems that neither party are prepared to take an unblikered look at it…..
    The best regulation is surely a blend of self regulation that is overseen by an independent body who have the power to intervene if and when necessary……not so hard to achieve….. same as other service industries
    It is also a fact that we have hugely powerful tool now called the internet together with about 20 million bloggers who are willing to oversee for free……all of which could used for this……
    Personally I think I think the house of commons should start the ball rolling on this and submit their expenses claims online…..then they would only get paid providing there are no valid objections…….
    Simple and transparent……and no less than we taxpayers deserve…….

  17. Pingback: John Ward – Diamond’s Amnesia At The Select Committee : A Reaility Injection – 5 July 2012 | Lucas 2012 Infos

  18. Diamond made it clear that Barclay,s libor input was of no significance. The highest and lowest four declarations were ignored and the average taken from the other seven data. 
    This process is one I have used in my own work and is very sound. Any errors can easily be dismissed. 
     The problem arrises when the whole data is flexed due to outside influences.
       This libor business is just a red herring. Yesterdays encounter was just another kangaroo court held by our disfuctional politicions. 
        

    • Libor is made up of 16 sets of statistics drawn from 16 instititions. The top and bottom 4 are thus discarded and the remaining 8 (not 7) are averaged. No one institution – like Barclays – can ‘rig’ the rate. It is impossible. Reminds me of the way a Doge was elected !

      The biggest problem is that Libor is made up of estimates and is not based on actual trading data.

    • But it was of significance because it prevented “the market” and us knowing that Barclays was actually insolvent.
      The fact that the thief didn’t actually manage to steal something of value does not mean there was no theft.
      I do agree that it is really a kangaroo court and most of its members are useless (Garnier seemed to be on the ball and not just grandstanding)-but it is the only one we voters have which will try to hold these people to account. And we hold the MP’s to account via the ballot box.

      • I think the point here is that one bank acting alone cannot materially affect the rate – and to expect 10 or 12 banks to act in concert without any organising influence is absurd.

      • I’m sorry Mick, you should look at the big picture. Try to get a morgage from Abbey or perhaps Halifax , Northern Rock or what about a car loan – just pop down to Alliance & Liecester.
         Yes all failed businesses. Our Kangaroo court complain about 20 million bonus but would appear to prefere the 100 billion to nationalize Barclays. 
         Like it or not Barclays is one of the worlds biggest banks now – not like the RBS basket case.    

      • Barclays WAS NOT INSOLVENT! It sold 7.7% of its shares to Qatar, raising a large sum which it used for its trading. It did not need interbank lending and wasn’t using it. In fact, none of the banks were using it during 2008! So since they weren’t using interbank lending the submissions to LIBOR from Barclays was “finger in the air” stuff! They actually presented a figure that was closer to the reality of how much it had cost them to source funds rather than how much it cost them to get those funds from other banks (one could argue that LIBOR should have been set up to account for this possibility from the very beginning, in which case the need to fiddle the submissions during the credit crunch would never have arisen).

  19. Perhaps we should all apply the soubriquet “Legs” Diamond to the gentleman in question – this would seem to sum up the true nature of the beast, as history just goes on repeating itself.

  20. JW,

    So Barclays preferred the Quataris to own them rather than the UK.

    Thought you would have had some comments to make on this given your affection for all things Islamic.

  21. update on the missing zebra (as outlined in my previous comment on führerurn in berlin):

    the zebra at the junction of wallis road, chapman road, and rothbury road, e9, has now reappeared, repainted onto the tarmac as if by effing socialist magic. thank olympus for that…one can but marvel at the all-encompassing power of slog. the yella beacons are not yet operational, however.

    i’m not sure whether the ‘splashpark’, a popular kiddies’ paddling pool in victoria park, is now properly back in operation…but, in any case, due to a tranche of multi-million pound olympic ‘improvements’ it has (in common with most of the park facilities) been out of action for almost a year-and-a-half – nearly two summers. never mind, east-london residents may well soon have access to the olympic aquarium – in about two years’ time…

    on a sad note, the famous vicky ‘firefox’ ride has been dismantled forever – but authorities have assured concerned park-users that all the deadly viral and bacterial organisms present in the former paddling-pool have been carefully preserved and released back into the new one, as part of a government commitment to conserve the integrity of the local hackney ecology.

  22. Diamond has previous form – from the Times (paywall) …

    Former Barclays chief: I wish I’d dumped Diamond in 1990s
    http://www.thetimes.co.uk/tto/business/industries/banking/article3469867.ece

    A former Barclays chief executive said today he regretted not having accepted Bob Diamond’s offer to resign from the bank after trading losses in the late 1990s.

    Martin Taylor, who ran Barclays between 1994 and 1998, said that he and others had fallen pray to “the myth of Diamond’s indispensability”. Writing in the Financial Times, he said that traders working under Mr Diamond had misled the bank about its exposure to Russian investments in the late 1990s.

    Mr Diamond, who was then head of Barclays Capital, had offered to resign, saying that he felt terrible about the situation and that he loved Barclays, Mr Taylor disclosed.

    Mr Taylor wrote: “I suspect the subsequent history of the business would have been very different had I asked him to go. I deserve blame for being among the first to succumb to the myth of Diamond’s indispensability, to which some in Barclays were still in thrall only a matter of days ago.”

  23. Pingback: John hobbing | A1stoptravel

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